How Payroll Services Work

Is managing your company's payroll a constant problem for you? Are you frustrated by the never-ending paperwork, computations, and having to transfer funds to multiple bank accounts, savings accounts and government agencies? Dealing with a company's payroll can be a difficult and stressful task that consumes time and money.

Payroll Service companies can help fix all of these problems for you and take your mind off of this complicated process. Payroll services specialize in calculating taxes, processing paychecks, and generating cost reports. These companies can also use payroll data to calculate labor costs for a project or a specific client. Payroll processing companies can handle all of your payroll needs and let you concentrate on your business.

Typically payroll services operate in the same way, but some will provide different services or methods for communicating with clients. They will shift saving and account transfers, wage calculation and tax withholding computations to a third party. You will have to set up an account that your payroll company can access. You will also have to provide them with employee tax information, such as their W-4 and I-9 forms and employee bank account routing numbers for direct deposit.

There are two different ways that a payroll processing company can make payments. They can use an account held by your business, or they can make payments from their own account. It is typically easier to allow the company to use one of your accounts to make these payments. If they are making the payments from one of their accounts then you will need to transfer money to them before each payday. You can set up an automatic deposit or link your account to theirs for transfers. A minimum balance or backup account is often required by companies to ensure payment on time.

Your payroll company will use these account funds to pay employee wages and taxes, and to pay itself processing or service fees that they charge either per-check or per-employee.

The firm will need your employee bank routing numbers if you are going to use a direct deposit. You will also have to provide information regarding any savings accounts, cafeteria plans, or other benefits to employees. You will be responsible for a procedure known as "calling in" or relaying payroll information. This can be set up as an automatic notification for each pay period.